A coalition of state financial officers, many from resource-rich states and all Republicans, is pushing back against climate change-combating banks that have adopted corporate policies cutting off financing for the coal, oil, and natural gas industries.

Capex Outlook

“These industries – which are engaged in perfectly legal activities – provide jobs, paychecks and benefits to thousands of hard-working families in our states and we will not stand idly by and allow our peoples’ livelihoods to be destroyed to advance a radical social agenda,” said West Virginia State Treasurer Riley Moore. “I’m not going to let woke capitalism destroy the jobs and the economy of West Virginia.”

Capital spending by U.S. exploration and production (E&P) companies is projected to increase 23.5% year/year in 2022.

Under the auspices of the United Nations, the global Net-Zero Banking Alliance consists of banks that commit “to aligning their lending and investment portfolios with net-zero emissions by 2050,” according to the alliance website. As of Dec. 21, U.S. banks that were members of the alliance included Amalgamated Bank, Bank of America, Citi, J.P. Morgan Chase & Co., Morgan Stanley, The Goldman Sachs Group Inc., and Wells Fargo & Co. 

According to a 2021 report by the Rainforest Action Network, the Sierra Club, Oil Change International, and other activist groups, the above banks – with the exception of Amalgamated and Goldman Sachs – together have provided nearly $1.1 trillion in financing to oil, gas, and coal clients since 2016.

Moore spearheaded the formation of a coalition of state financial officers in 15 states who have pledged to “scrutinize or potentially curtail future business” with banks that have policies against financing for the coal, oil, and gas sectors. Moore told NGI that such boycotts are tantamount to a presumption of guilt for the industries.

“Here’s the crux of the issue: How can I take tax dollars generated from the coal and gas industries and then give” that money to banks opposing those industries important to the state, said Moore.

In an open letter addressed to the U.S. banking sector, the state treasurers, auditors, and comptrollers pledged to “take concrete steps within our respective authority to select financial institutions that support a free market and are not engaged in harmful fossil fuel industry boycotts for our states’ financial services contracts.” 

Members of the coalition said they represent more than $600 billion in public assets under management. Joining West Virginia in the multistate effort are Alabama, Arizona, Arkansas, Idaho, Kentucky, Louisiana, Missouri, Nebraska, North Dakota, South Carolina, South Dakota, Texas, Utah, and Wyoming. 

“Corporate agendas that attack our oil and gas industry, which has been so vital to our state, must be called out…I will stand with other financial officers to fight against these job-killing policies that harm our economy,” said Louisiana Treasurer John Shroder.

Moore told NGI that his peers in another resource-rich state, Alaska, have expressed interest in the coalition.

“It sounds like they’ll join as well,” he said. With additional states, “I think it’s going to grow and I think we’re going to have more leverage.”

A Level Playing Field

Coalition members said they “simply want financial institutions to assess fossil fuel businesses as other legal businesses – without prejudice or preference.” 

Moore told NGI that states “contract out essentially all of our financial services and have all of our assets parked” in banks. Though contract frameworks vary by state, Moore said that in West Virginia the state can generally opt out of contracts with 30 days of notice.

“We are changing our contracting process” in West Virginia, said Moore. Banks are “going to have to be able to certify they’re not going to boycott the fossil fuel industry. To be clear, what we’re undertaking here is our preferences in the market. I’m not a market regulator. I’m a market participant…and these are West Virginia’s preferences in the market.”

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Utah State Auditor John Dougall said banks and investors should concentrate on how well companies can potentially “provide increased shareholder value, rather than favoring certain partisan agendas, particularly at the expense of shareholders. Energy companies of all types should have unfettered access to capital and lending markets.”

Arizona Treasurer Kimberly Yee said “it is important to carefully scrutinize the financial institutions Arizona does business with, especially those that are engaged in politically motivated attacks on legitimate businesses, which are critical to our nation’s economy and energy independence.”

The 15-state coalition issued its letter to the banking industry in November. Moore told NGI last week that his office has since received feedback from banks. Some of the banks have said “they are not going to get involved in what I view as a boycott/denial of access to capital for the fossil fuel industry,” said Moore.

He added that banks opting against making oil, gas, and coal companies financing pariahs might also decide to compete for large state banking contracts.

“These are sweet contracts,” Moore said, explaining that they are low-risk and “look great on a balance sheet.”

Moore said he hopes the coalition’s efforts ultimately will motivate banks to “come to their senses and…want to act like a bank…and be involved in funding. If they want to get involved in politics, they’re going to find out it’s a full-contact sport.”

Earlier this year, Riley and other state financial officials sent a letter to John Kerry, the U.S Department of State’s special presidential envoy for climate, expressing “deep concern” amid reports that he and other Biden administration officials were “privately pressuring U.S. banks and financial institutions to refuse to lend to or invest in coal, oil, and natural gas companies.”

Samantha Galvez, press secretary for Pennsylvania’s GOP Treasurer Stacy Garrity, told NGI that Garrity “is strongly opposed to the Biden administration’s efforts to pressure financial institutions into divesting from coal, oil, and natural gas companies.”

On Dec. 6, Garrity sent a letter to financial institutions doing business with Pennsylvania’s Treasury Department advising them her department “has a compelling interest” to know whether institutions it works with are “engaged in energy policies harmful to the state’s economy and, thus, its residents.”

Citing U.S. Energy Information Administration figures, Garrity noted that Pennsylvania is the United States’ second-largest natural gas producer, its third-largest coal producer, its second-largest coal exporter, and the third-largest net energy supplier to other states.

As a result, Garrity wrote that her department will “carefully assess its relationships” with financial institutions with which it does business. She said that an example of such an assessment would be having institutions complete “due diligence questionnaires” to gauge whether they “are engaged in policies which would be harmful to the reliable energy companies which are so important to the residents of Pennsylvania.”

For their part, officials with U.S. oil and gas industry groups have pointed out the sector is advancing efforts to curb its emissions. E&P and midstream companies are also increasingly seeking environmental certification for natural gas.